Do you want to start a coffee shop business from scratch? If YES, here is a complete guide on how to start a profitable coffee shop with no money or experience; plus a sample coffee shop business plan template and coffee shop marketing plan.
Coffee business is one of the businesses that an entrepreneur can successfully start in the corner of a busy street or on a mobile shop without breaking the bank for cash.
At the same time, big – time investors can also leverage on the high demand for coffee to set up their own coffee shops / cafés in strategic locations all around key cities in the united states of America and in other parts of the world. Coffee shops / bars can be located in any part of town as long as there are people living or working there.
Generally, coffee shops / bars are located in airports, sea ports, shopping malls, hotel lobby, railway stations, bus station, campuses, hospital lobby, and sport centers and in any public facilities as long as you are given the permission to locate your coffee shop there.
On the other hand, if you operate a mobile coffee shop, then there won’t be any restriction to the places you can sell your coffee just like the conventional food truck business.
One good thing about starting a coffee shop business is that if you are diligent enough and if you have good business / marketing strategies, you can build the business from just one outlet to numerous outlets across different cities in the world from the sale of franchise.
So, if you are considering opening a coffee shop business, all you would need is some capital to purchase or lease / rent a suitable facility (if you are not settling for mobile coffee shop),the required equipment / utensils, and furniture.
You would also need some additional capital to purchase the initial supply of assorted coffees, sugar, cream / milks et al, pay your employees at least for the first 3 months, and also to pay your utility bills. These expenses are called “working capital.”
Steps to Starting a Coffee Shop With No Money
1. Understand the Industry
From the recent statistics released, Starbucks and Costa Coffee are some of the leading Coffee Business Company in the world.
For example, Costa Coffee™ operates about 1,755 coffee bars in the united kingdom alone and about 1,106 outlets in 30 countries of the world. Starbucks coffee house has over 21,000 coffee outlets all over the globe and as of the last count, they generated a total revenue of $16 billion and of course they are still soaring higher.
Interesting Statistics About the Industry
There are different types of coffee drinks that you can find in a coffee shop, some of them are cappuccino, espresso, iced coffee, decaffeinated coffee, alcoholic coffee (Irish Coffee and Brandy Coffee et al), filtered coffee, cold brew coffee, Turkish coffee, coffee with milk, coffee or espresso with whipped cream, and flavored coffee et al.
It is proven fact that the turnover for an average coffee bar can be as high as 50% and above that is why entrepreneurs who intend making good money from a business with less struggle opens their own coffee shop; they either start their own coffee bar from the scratch or buy franchise.
Despite the fact that coffee shop business has been in existence as far back as civilization started, one can conveniently state that the coffee shop industry is indeed a growing industry and several entrepreneurs all over the world are making fortunes from the business.
Just every other food and drinks related business, it is a business that does not go out of season simply because drinking coffee has become a way of life to countless numbers of people all around the world. So also the fact that people go to coffee shops to relax and network with other like minds makes the business and ever – Green business.
If you are conversant with Coffee business in the United States of America, you will quite agree that coffee consumption has shown steady growth over the years and from all indication, the growth is not going to plummet. Coffee addicts would always go out of their way if possible to stop by a coffee shop to drink a cup of coffee.
Usually, sales for coffee triples during winter season and in most cases small coffee bars struggle to meet the demand for coffees during this period. Over and above, those who run coffee shops don’t struggle to attract clients especially if they are well positioned.
Some of the factors and incentives that encourage aspiring entrepreneurs to venture into opening a coffee shop is the fact that the required amount needed to start a coffee shop business especially when you choose to start a small or mobile coffee business is not on the high side compared to other small scale businesses.
That makes it easier for loads of entrepreneur who are interested in the business to come into the industry at any time they desire; the entry barriers are quite affordable and any serious minded entrepreneur can comfortably raise the start – up capital without collecting loans from the bank.
2. Conduct Market Research and Feasibility Studies
- Demographics and Psychographics
When it comes to selling coffee, there is a wide range of people that consume coffee; there are no defined demography and psychographics that needs it. The location you choose to locate your coffee shop will go a long way to determine the demography of people that will patronize your coffee shop.
For example, if you locate your coffee shop in business district, most often than not, the caliber of people that are likely going to patronize your coffee shop are working class and top executives so also if you locate your coffee shop in a campus, the demography of those that are likely going to patronize your coffee shop will be more of students.
3. Decide What Niche to Concentrate On
The coffee industry is one of the industries that does not have clear cut niches like other industries. This is so because any one who decides to open a coffee shop knows that the core of his or her business is to sell assorted coffee howbeit served in different flavors to his or her customers as requested by them.
However, there are different business opportunities in the coffee industry value chain. We have;
- Coffee farmers
- Coffee Processors / Exporters
- Coffee Shops (Fixed coffee shops, mobile coffee shops and online coffee retailing shops et al)
The Level of Competition in the Industry
The fact that starting a coffee shop business is easy to start, requires low start – up capital, requires no technical skills and it is a profitable venture makes it one of the businesses that loads of people would want to start hence the high level of competition in the industry.
There are different levels of competition in the coffee shop business and it exists between larger coffee shops like Starbucks, Costa Coffee and other big – time coffee shops. So also there are competitions between smaller coffee shops especially those who are involved in the operation of mobile coffee shop.
The truth is that, despite the level of competition in the coffee shop business, entrepreneurs who are running the business are still making their profits and some of them generate as 50 percent turnover rate especially those that are well positioned and over time have been able to secure loads of loyal customers.
4. Know the Major Competitors in the Industry
These are the list of some of the largest coffee chains in the world;
- Starbucks™ Coffee!
- Costa Coffee™
- Gloria Jean’s Coffees
- Caribou Coffee
- Coffee Beanery
- Dunkin’ Donuts
- McCafe (McDonald’s franchise)
- Tully’s Coffee
- Peet’s Tea and Coffee
- Lavazza Coffee
- Bewley’s (The oldest coffee house in the world)
- Tim Hortons
Opening a coffee shop just like starting any other business requires that you conduct your feasibility studies and market survey so as to get your economic analysis right.
As a matter of fact, you just have to get your economic analysis right if your intention of building the business is to generate profits, grow the business and perhaps expand the business beyond one location to other locations within the United States and other cities in the world.
When conducting economic analysis for your coffee shop business, you have to critically examine these key factors; place, product, pricing, and promotion. As a matter of fact, you would have to continue to review these key factors at regular interval while running your coffee shop.
It is important for coffee shop owners to be aware that running their own single coffee shop outlet (an independent coffee shop) is different from managing or operating a coffee shop chain or franchise. Managing or operating a coffee – shop chain or franchise attracts additional impediments like incentive alliance, bureaucracies, growth strategy, and operational guidelines et al.
5. Decide Whether to Buy a Franchise or Start from Scratch
If your aim of starting a coffee shop business is just to earn money and make a living without much stress, then you can afford to look for a successfully coffee shop company and buy their franchise.
Here is a list of profitable coffee shop franchise opportunities. but if your aim of starting a coffee shop business is to build a business that will grow from just one outlet in one city to different cities all around the world, then starting from the scratch is your best bet.
Although, starting a business from the very scratch might not be easy, but one thing is certain, if you are diligent and you apply the right business strategies per time, it won’t be too long before your business brand becomes recognized not only in your city or state, but throughout the United States of America and the rest part of the world.
6. Know the Possible Threats and Challenges You Will Face
The threats and challenges that is likely going to confront a start – up coffee shop business is the fact that they competing with already established coffee shops and also other coffee shops that are likely going to be opened within the same location.
You would have to go all out to compete for the available market in the location you choose to set – up your own coffee shop. Other threats and challenges that you are likely going to face when you start your coffee shop business are economic downturns which usually affect purchasing powers and also unfavorable government policies.
7. Write a Business Plan
If you want to start your own coffee shop business, you are required to write a detailed coffee shop business plan that can pass reality test when subjected to it; you should work with the facts, figures and other indices in the industry as it applies to the location you intend opening your coffee house.
Your business plan should outline and cover strategies on how you intend to manage your coffee shop business. As a matter of fact, it is safer to underestimate when writing a business plan so that you won’t be so disappointed when reality sets in. These are the key areas that should be covered in your business plan;
- Executive summary and Company’s descriptions: you are expected to write about the concept of your business, descriptions of your company, your company’s vision statement, mission statement and where your company will be located.
- Other key components that should not be missing in your coffee house business plan are product offering, coffee shop SWOT analysis, competitive analysis, marketing and sales analysis / strategies, target market, market goals, pricing, costing and financial projection, publicity and advertising strategy, expansion and growth strategies, budget and start – up capital generation et al.
How Much Does It Cost to Start a Coffee Shop?
No matter where you intend starting your coffee shop business in the United States, these are the key expenses you are expected to make when starting a medium scale but standard coffee shop business in the United States of America;
- The Total Fee for Registering the Business – $750.
- Legal expenses for obtaining licenses and permits as well as the accounting services totaling – $1,300.
- Marketing promotion expenses for the grand opening of your coffee house in the amount of $3,500 and as well as flyer printing (2,000 flyers at $0.04 per copy) for the total amount of $3,580.
- Cost for hiring Consultant – $2,500.
- Insurance (general liability, workers’ compensation and property casualty) coverage at a total premium – $2,400.
- Cost for payment of rent for 12 month at $1.76 per square feet in the total amount of – $52,800.
- Cost for Shop remodeling – $10,000.
- Other start-up expenses including stationery ($500) and phone and utility deposits ($2,500).
- Operational cost for the first 3 months (salaries of employees, payments of bills et al) – $60,000
- The cost for Start-up inventory – $16,027
- Coffee beans (12 regular brands and five decaffeinated brands) – $6,000
- Coffee filters, baked goods, salads, sandwiches, tea, beverages, etc. – $7,900
- Retail supplies (napkins, coffee bags, cleaning, branded dresses for staffs, etc.) – $1,840
- The cost for office supplies (one month) – $287
- The cost for Espresso machine – $6,000
- The cost for Coffee maker – $900
- The cost for Coffee grinder – $200
- Food service equipment (microwave, toasters, dishwasher, refrigerator, blender, etc.) – $18,000
- Storage hardware (bins, utensil rack, shelves, food case) – $3,720
- The cost for counter area equipment (counter top, sink, ice machine, etc.) – $9,500
- Cost for serving area equipment (plates, glasses, flatware) – $3,000
- Cost for store equipment (cash register, security, ventilation, signage) – $13,750
- Office equipment and furniture – $3,600
- The cost for the purchase of furniture and gadgets (Computers, Printers, Telephone, TVs, Sound System, tables and chairs et al) – $4,000.
- The cost of Launching a Website – $600
- The cost for our opening party – $5,000
- Additional Expenditure (Business cards, Signage, Adverts and Promotions et al): $5,000
Cost of Opening a Coffee Shop on a Small Scale
Going by the report from the market research and feasibility studies, you would need an estimate of about $75,000 – $250,000 to successfully set up a standard small scale coffee bar business in the United States of America. The amount includes the salary of all employees and the CEO (Owner) for 3 months.
Please note that despite the fact that it is a small – scale coffee shop does not mean that it is in same level with the average mobile coffee cart / coffee kiosk in the United States. You should also research to have an idea of how much coffee shop owners make monthly and annually.
Cost of Opening a Coffee Shop on a Medium Scale
You will need an estimate of three hundred thousand dollars ($300,000) to successfully set up a medium scale but standard coffee shop in the United States of America. Please note that this amount includes the salaries of all the staff for the first 3 month of operation and it only applies to single coffee shop.
Cost of Opening a Coffee Shop on a Large Scale
When it comes to starting a standard and large-scale coffee shop / café / bar with several outlets in key cities in the United States of America, a company with the intention of selling franchise, then you should look towards budgeting well over one million dollars ($1million).
8. Choose a Suitable Location for your Business
The fact that there different sizes of coffee cafés scattered across the United States does not mean that coffee shop business can thrive in every location. Before choosing a location for your coffee shop business, ensure that you conduct a thorough feasibility studies and market survey.
There are possibilities of you coming across a coffee café that just closed shop in the location you want to open your coffee house can’t be ruled out. This is why it is very important to gather as much facts and figures before choosing a location to set – up your coffee shop business. These are some of the factors that you should consider before choosing a location for your coffee shop;
- The demography of the location
- The purchasing power of the residence of the location
- Accessibility of the location
- The numbers of coffee shops in the location
- The local laws and regulations in the community / state
- Traffic, parking and security et al
9. Choose a Catchy Business Name
- Coffee4All® Café
- Shavonne’s Coffee Café
- Delicious Delight Coffee House
- Coffee and Snacks Inc.
- Mercy and Shannon Coffee Shop
- Moore Mobile Coffee Shop
- Sean Drake Coffee Assorted Coffee House
10. Choose the Most Suitable Legal Entity (LLC, C Corp, S Corp)
It depends on what you want and the type of Business model that you intend building; you have the options of either choosing a limited liability company which is commonly called an LLC, or a sole proprietorship. Ordinarily, sole proprietorship should have been the ideal business structure for a coffee shop business especially if just starting out with a moderate capital.
But people prefer limited liability Company for obvious reasons. As a matter of fact, if your intention is to open several outlets of your coffee shop in the different cities and to sell franchise, then choosing sole proprietor is not an option.
For example, Setting up an LLC protects you from personal liability. If a customer that patronized your coffee shop suffers an allergy attack from your coffee, his lawyers can’t go after your property or properties. It is only the money that you invested into the limited liability company that will be at risk.
It is not so for sole proprietorships and partnerships. Limited liability companies are simpler and more flexible to operate and you don’t need a board of directors, shareholder meetings and other managerial formalities.
11. Get the Necessary Legal Documents You Need to Operate
The legal requirements for a coffee house business may vary slightly from country to country, states to states and even from cities to cities.
So it is important to contact your local authority to know the legal requirements that you would need in order to successfully open your own coffee shop business in your country without stress. These are some of the basic legal requirements needed before you can successfully start and run your own coffee shop business;
- Business and liability insurance
- Foods and drinks handler certificate
- Health inspection Certificate
- Proof of district-issued food and drinks manager identification card
- Food purchase record storage and record keeping (If you are also involved in the sale of snacks)
- Depot, commissary or service support facility meets vending unit operation needs
- Copy of license for the service support facility and/or a recent inspection report
- Tax Payer’s ID
- Fire certificate
- Kitchen insurance
- Certificate of Incorporation
- Business License
- Business Plan
- Non – disclosure Agreement
- Employment Agreement (offer letters)
- Employee’s Handbook
- Operating Agreement for LLCs
- Building License
- Liquor License (optional)
- Cabaret License
- Music License
- Franchise or Trademark License
12. Get the Necessary Professional Certification
From a general perspective, you might not have need for professional certification before you can be allowed to operate your own coffee shop business in the United States of America, Canada, and Australia and even in Europe. But you would need to get clearance from local health authority and foods and drugs agencies before you can be allowed to open and operate a coffee house.
This is so because the coffee house business is considered as a delicate business; it involves foods and drinks. You will also need a kitchen clearance certificate, food handler certificate and perhaps other relevant certification as it applies to your country or even your state.
13. Discuss with an Agent to Know the Best Insurance Policies for You
When it comes to starting a coffee shop business there are key insurance policies that you must have in place same applies to any other industry you intend starting a business.
It is important to note that you can’t be permitted to run a coffee shop business in the United States, in Canada, Australia and in Europe if you don’t have the basic insurance cover for your business; the food and drinks industry is a delicate business hence the need for the industry to be highly regulated.
These are some of the basic insurance cover to purchase for your coffee shop business in the United States of America and also in most parts of the world;
- General insurance
- Health insurance
- Liability insurance
- Kitchen Insurance
- Workers Compensation
- Overhead expense disability insurance
- Business owner’s policy group insurance
14. Hire Employees for your Technical and Manpower Needs
When it comes to operating a coffee shop business, it is important to ensure that you acquire brand new coffee equipment. As a matter of fact, kitchen utensils and equipment are affordable. Some of the kitchen utensils and equipment that you would need to launch your coffee shop are;
Gas Cooker, Microwave Oven, Fridge, Deep Freezer, Bread Toaster, Blenders, Espresso machine, Pots, Pans, Cutleries, restaurant furniture, tableware, sound system, flat screen TVs, POS machines, Coffee grinder and Coffee maker. You would also need accounting software, CRM software, payroll software et al.
If you have the required finance, it is to your advantage to acquire a property or lease a facility to be used for your coffee café; it usually gives you the freedom to design the facility the way you want to it to be. But if you are low on cash, then you don’t have any option other than to rent a facility.
As regard employees, there are certain roles that must be occupied before you can effectively and successfully run a coffee shop business.
You would need to employ a Bar Manager, Bartender / Baristas, Accountants / Cashiers, Greeters / Customer Service Agent / Table Attendant, Security Officers, and Cleaners. On the average, you would need a minimum of 10 – 15 employees.
The Service Delivery Process of the Business
When it comes to the production process involved in running a coffee shop, the process is simple and straightforward. First and foremost, the management of the coffee bar must ensure that they have assorted coffees and must of have trained their baristas / bartender on how to serve various types of coffees as requested by their customers. In other words, when a customer comes in, they place their order and then the coffee is mixed and served as requested.
15. Write a Marketing Plan Packed with ideas & Strategies
It is important to clearly state that in this dispensation, customers use the Internet to find coffee cafés, to read reviews, to view menus, and of course to reserve tables online; loads of processes have gone digital.
This is why most coffee shops are increasingly adopting technology and the internet for marketing and advertising their business. These are some of the coffee shop marketing ideas and strategies that you can adopt for your coffee shop business;
- Direct Marketing
- Sponsor TV and Radio Programs
- Erect your Billboards in Strategic locations around the city
- Making use of sales Agents and sales reps
- Online Marketing (via your official website, social media platforms and blog et al)
- Referral Marketing
- Revenue Sharing Business Partners (Event Planners and Contractors)
- Public relations during exhibitions and corporate events
16. Work Out a Reasonable Pricing for your Services & Products
It is a fact that any fluctuation in coffee bean cost directly impacts margins. One of the ways to get the right pricing and still make reasonable profit from coffee shop business is to ensure that you buy coffee beans and other related food / snack ingredients in bulk and perhaps directly from a coffee manufacturer or a farm market. This will help you to mitigate cost fluctuations.
You can as well employ only key employees and outsource some roles that are not essential. With that, you will be able to cut cost of running the business and that will in turn help you get the right pricing that will enable you attract loads of customers.
17. Develop Iron-clad Competitive Strategies to Help You Win
When it comes to competing favorable in the coffee shop industry, you would have to be very creative to stay on top. The truth is that, if your customers have the opportunity to buy neatly brewed assorted coffees, and they also have the opportunity to drink their coffee in a relaxed environment; they would always prefer your coffee house to other coffee shops within same location.
Another competitive strategy is to ensure that your coffee beverages are served in different forms (cappuccino, espresso, iced coffee, decaffeinated coffee, alcoholic coffee (Irish Coffee and Brandy Coffee et al), filtered coffee, cold brew coffee, Turkish coffee, coffee with milk, coffee or espresso with whipped cream, and flavored coffee et al.
18. Tips for Running a Coffee Shop Business Successfully
Running a coffee shop business involves itemizing the coffee menus and snacks you want to sell for the day, purchase and prepare the coffees and ensure that you arrange your coffee house to create a conducive atmosphere to welcome your customers.
After the day’s sales, the books will be balanced; the coffee house facility should be cleaned. The plates, pots, and pans and every other stuff will be washed and kept in the appropriate place.
It is important to state that the success of any business lies in the commitment and dedication of the employees. So if you intend running a successful coffee house, then you must ensure that you carry every member of your team along. You should create time for meetings; a time where goals, processes and issues will be reviewed et al.